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Financial Services Manual (FIN)

Effective: 5/1/1996

Revised: 9/12/2011

FIN 425–06: Payments
to Postdoctoral Nonresident Aliens

Purpose

To describe the policy for making scholarship, fellowship,
grant, and stipend payments, for which services are not required,
to nonresident alien postdoctoral students, researchers, and
sponsored project participants

Sources

Internal Revenue Service

University policy

Applicability

All payments for scholarships, fellowships, grants, and
stipends, for which services are not required, made to postdoctoral
students, researchers, and participants in sponsored projects

Background

The Internal Revenue Service (IRS) requires that all fellowship,
scholarship, grant, and stipend payments, for which services are
not required, be made in accordance with IRS regulations. These
regulations require that taxes be withheld from payments made to
nonresident alien postdoctoral students, researchers, and sponsored
project participants unless exempt due to a tax treaty.

The IRS also requires that all payments made to nonresident
aliens be reported annually on IRS Form 1042S, Foreign
Person’s U.S. Source Income Subject to Withholding. A copy of
the form is sent to the nonresident alien at the time it is filed
with the IRS. The IRS requires that Form 1042S be filed by March 15
following the calendar year in which payments were made to the
nonresident alien.

Policy

All postdoctoral students, researchers, and sponsored project
participants are required to declare their citizenship and U.S.
immigration status if applicable, and to indicate whether they are
in postdoctoral status, upon arriving at ASU. Payments to
postdoctoral nonresident aliens will be subject to withholding
unless:

the payment is exempt due to a tax treaty between the
nonresident alien’s country and the U.S.

the nonresident alien has submitted to the appropriate
university office a completed IRS Form W-8BEN or Form 8233 properly
executed and signed by the nonresident alien

and

the nonresident alien has completed the Alien Data Collection Form and attached a
Student and Exchange Visitor Information System (SEVIS) Form I-20
or DS-2019, an I-94, and a copy of his or her passport photo. (For
more information on completing the Alien Data Collection form see
FIN 425–04, “Nonresident Alien Independent Contractors and Other Foreign Entities.”)

If these requirements are not met, the payment will be reduced
by 30 percent for federal withholding. A list of existing tax
treaties between the U.S. and other countries is found in IRS
publication 901, U.S. Tax Treaties, which is available from
Financial Services (480/965–3601), the International Students
Office (480/965–7451), and the International Programs Office
(480/965–5965).

If an individual believes he or she is entitled to tax treaty
benefits, he or she should contact the ASU tax compliance area
(480/965–8479 or 480/965–0108) for an appointment to
discuss the applicable tax treaty and complete the required forms
to exempt the withholding requirement.

Payments cannot be made to a nonresident alien unless he or she
is in the U.S. on a visa type that allows him or her to receive
scholarship, fellowship, grant, or stipend payments (not for
independent services). See FIN
425–02, “Immigration Status—Eligibility to
Receive Payment,” for guidance on allowable payments to
various immigration categories. Any additional questions regarding
visas should be referred to the International Programs Office at
480/965–5965 or the International Students Office at
480/965–7451. For more information concerning payments made
to nonresident aliens, contact at Financial Services at 480/965–8479 or 480/965–0108.

Additional
Information

For additional guidelines on nonresident alien tax issues see
the ASU Foreign Visitor Tax
Guide issued by Financial Services. A copy
of this guide may be obtained by calling Financial Services at
480/965–8479 or 480/965–0108.

Forward payment documentation for postdoctoral scholarships,
fellowships, grants, and stipends to the Student Business Services
Office or to the tax compliance area to obtain computation of
necessary exclusions and Form W-8BEN from the postdoctoral
participants.